Newsletter Power & Utilities
Newsletter Power & Utilities in Europe July, 2017 1
Power & Utilities July 2017
Newsletter Power & Utilities
NEWSLETTER Newsletter June 2017
Power & Utilities in Europe
COMMODITIES
Commodities
Crude oil Crude oil ($/bbl) Source: Capital IQ Crude oil ($/bbl) 120 OPEC and 11 non-OPEC countries, including Russia, agreed to extend Spot Brent 110 production cuts of 1.8m barrels per day until 2018. Compliance with the 100 Spot WTI 90 agreement has been high at around 96%. However, Libyan and Nigerian oil 80 productionFuture (both of whom are exempt from production cuts) increased over Brent 70 the second quarter. 60 50 Global supply rose to 96.7mb/d and OECD commercial oil stocks are now 40 30 higher than their levels when OPEC first agreed to cut production. As a result of the continuing oversupply in the oil market, oil prices have been in phased decline from $55/bbl in March to reach a low of $45/bbl by the end of
June. The period from April to June 2017 saw prices heading for the biggest Spot Brent Spot WTI Future Brent Future WTI quarterly decline since 2015, during which time Brent Crude has fallen about
Source Capital IQ 10 percent. OPEC and 11 non-OPEC countries, including Russia, agreed to extend production cuts of 1.8m barrels per day until 2018. Compliance with the agreement has been high at around 96%. However, Libyan and Nigerian oil production (both of whom are exempt from production cuts) increasedGas over the second quarter. Global supplyGas rose (€/MWh)to 96.7mb/d and OECD commercial oil stocks are now higher than Source: Capital IQ their levels when OPEC first agreed to cut production. As a result of the continuing oversupply in the oil market, oil prices have been in phased decline from $55/bbl in March to reach a low of $45/bbl by the end of GasJune. (€/mWh) The period from April to June 2017 saw prices heading for the biggest quarterly decline since 2015, during which time Brent Crude has fallen 30 Gas prices in Q2 2017 have largely met expectations from Q1 and have about 28 10 percent. 26 followedSpot NBPtypical seasonal consumption patterns with warming weather 24 reducingSpot TTFdemand after a cold winter. Particularly hot weather in the UK in June 22 Future NBP 20 combined with the UK Belgium gas interconnector closing for maintenance saw Future TTF 18 UK prices fall sharply in late June as falling demand and a lack of export route 16 14 for UK gas fed through to wholesale prices. 12 10 In the forwards market the spread between NBP and TTF for next winter has widened. This may reflect the recent announcement in June that the Rough gas storage facility, which accounts for 70% of UK gas storage
Spot NBP Spot TTF Future NBP Future TTF capacity, is to close permanently after being partially closed over winter Gas prices in Q2 2017 have largely met expectations from Q1 and have2016/17. followed typical Source Capital IQ seasonal consumption patterns with warming weather reducing demand after a cold winter. Particularly hot weather in the UK in June combined with the UK Belgium gas interconnector closing for maintenance saw UK prices fall sharply in late June as falling demand and a lack of export route for UK gas fed through to wholesale prices.
In the forwards market the spread between NBP and TTF for next winter has widened. This may reflect the recent announcement in June that the Rough gas storage facility, which accounts for 70% of UK gas storage capacity, is to close permanently after being partially closed over winter 2016/17.
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Coal
Source: Capital IQ Coal ($/metric ton) Coal ($/metric tonne) 100 The coal price slide from late 2016 was arrested in April as Cyclone Debbie 90 hitSpot key ARAcoal production facilities in Australia. This lead to China becoming 80 a keyFuture swing ARA supplier of coal in the global market during and immediately 70 following the cyclone switching from being the largest coal importer in 2016 to
60 being a major exporter at on spot markets. As markets moved into June coal prices ticked up again to around 80$/metric tonne. 50
40
Spot ARA Future ARA
Source Capital IQ
The coal price slide from late 2016 was arrested in April as Cyclone Debbie hit key coal production facilities in Australia. This lead to China becoming a key swing supplier of coal in the global market during and immediately following the cyclone switching from being the Carbonlargest coal importerCarbon in 2016 to being a major exporter at on spot markets. As markets moved into June coal prices ticked up again to around 80$/metric tonne. Source: Capital IQ CO2 (€/ton)
CO² (€/ton) 10 Carbon prices have decreased steadily in Q1 and Q2 of 2017, but have not 9 reachedSpot ETS comparable levels to August 2016. There was a late uptick in prices 8 inFuture June 2017ETS but generally trading has been fairly flat with negotiations to 7 finalize the post-2020 EU ETS reform bill failing to reach an agreement in 6 June. 5 Longer term the potential for Brexit to impact on the EU ETS has been raised 4 as a risk that may introduce volatility to EUA prices. If Brexit negotiations 3 were to result the UK leaving the EU ETS then this could have negative impacts on the market as a whole but the price movement will depend on whether the UK is expected to be a long term net purchaser or seller of EUAs Spot ETS Future ETS Source Capital IQ compared to its current allocation.
Carbon prices have decreased steadily in Q1 and Q2 of 2017, but have not reached comparable levels to August 2016. There was a late uptick in prices in June 2017 but generally trading has been fairly flat with negotiations to finalize the post-2020 EU ETS reform bill failing to reach an agreement in June.
Longer term the potentialBaseload for Brexit Electricity to impact on the EU ETS has been raised as a risk that may introduceBaseload volatility Electricity to EUA prices. If Brexit negotiations were to result the UK leaving the
EUSource: ETS Bloomberg then thisBaseload could have Spot negative Day impactsAhead on (€/MWh) the market as a whole but the price movement will depend on whether the UK is expect to be a long term net purchaser or seller of EUAs compared to its currentBaseload allocation. Spot Day Ahead (€/MWh) 90 Moving out of a cold winter and into warmer months has seen electricity
80 prices fall back from their winter peaks across the continent. This was Germanysupported by improving capacity margins and falling wholesale gas prices. UK 70 Italy The return to full capacity of the interconnector between Great Britain France 60 and France increased flexibility in these markets and the return of a number of French nuclear plants to normal service eased supply concerns in these 50 markets.
40 The return to more normal market conditions exposed the structurally higher level of UK power prices as a result of the UK’s Carbon Price Floor legislation 30 which tends to make the UK a net importer of cheaper continental power.
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Germany UK Italy France
Moving out of a cold winter and into warmer months has seen eleSourcectricity Bloomberg prices fall back from their winter peaks across the continent. This was supported by improving capacity margins and falling wholesale gas prices. The return to full capacity of the interconnector between Great Britain and France increased42 flexibility in these markets and the return of a number of French nuclear plants to normal service eased supply concerns in these markets.
The return to more normal market conditions exposed the structurally higher level of UK power prices as a result of the UK’s Carbon Price Floor legislation which tends to make the UK a net importer of cheaper continental power.
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UK clean dark & spark spread
Source: Bloomberg UK Clean dark & spark spreads (£/MWh)UK Clean dark and spark spreads (£/MWh) 35 30 Following highs of both clean spark spreads and clean dark spreads in 25 Clean sparkNovember, spread gas plan margins have fallen back to their pre-peak levels whilst coal 20 Clean darkmargins spread continued to fall to their lowest level in many years reaching -£5/MWh. 15 10 This was driven by increasing generation from low marginal cost sources 5 leading to gas plant regularly being the price setting plant on the UK 0 system rather than coal and falling gas plant eroding margins available -5 for coal generators. -10 June in particular saw significant generation from low marginal cost generation with a new record set for low carbon generation on the UK
Clean spark spread Clean dark spread system. For a period on the 7th of June more than 70% of generation in the UK Following highs of both clean spark spreads and clean dark spreads in November,was gas from plan low carbon sources. This briefly pushed prices into negative territory margins have fallen back to their pre-peak levels whilst coal mSourceargins Bloomberg continued to fall to their lowest level in many years reaching -£5/MWh. This was driven by increasingfurther generation biting into margins for conventional generators. from low marginal cost sources leading to gas plant regularly being the price setting plant on the UK system rather than coal and falling gas plant eroding margins availableWith for increasing coal low carbon generation on the UK system this is a pattern generators. that can be expected to be repeated in the future.
JuneGerman in particular clean saw dark significant & sparkgeneration spread from low marginal cost generation with a th new record set for low carbon generation on the UK system. For a period on the 7 of June more than 70% of generation in the UK was from low carbon sources. This briefly pushed Source: BloombergGerman Clean dark & spark spreads prices into negative territory further biting into margins for conventional generators (€/MWh)
With increasing low carbonGerman genera Cleantion on dark the UK and system spark this spreadsis a pattern (€/MWh) that can be expected15 to be repeated in the future. Weak EU ETS prices continue to mean that coal is typically the price setting 10 plant in the German merit order. As the marginal plant for much of the time 5 the margins for coal generation have been fairly stable over the last 3 0 months with electricity prices just high enough to bring to the market -5 the levelClean of spark coal spread generation needed. Spark spreads increased in the second -10 quarter of 2017 reflecting the decline in gas prices.However, these were -15 Clean dark spread still too low for gas generation from plants with average efficiency to be -20 profitable to dispatch. -25
Clean spark spread Clean dark spread Weak EU ETS prices continue to mean that coal Source is typically Bloomberg the price setting plant in the German merit order. As the marginal plant for much of the time the margins for coal generation have been fairly stable over the last 3 months with electricity prices just high enough to bring to the market the level of coal generation needed. Spark spreads increased in the second quarter of 2017 reflecting the decline in gas prices. However, these were still too low for gas generation from plants with average efficiency to be profitable to dispatch.
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Spotlight on Power and Utilities market Capital market overview
Deloitte Gas Enel Iberdrola ENGIE EDF E.ON SSE Centrica RWE Index (1) Natural Market cap. ratios Natural E.ON SSE Currency EUR EUR EUR EUR EUR EUR EUR GBP EUR Market Cap as of June 17 49 496 45 055 33 114 26 826 21 712 18 600 14 948 11 033 11 960 3m stock price performance 9% 11% 6% 6% 29% 4% 22% 3% -3% 24% YoY stock price performance 5% 23% 17% -4% -10% 19% -2% -4% -9% 34% Market multiples EV/EBITDA FY16e 8.6x 8.4x 10.8x 7.1x 7.6x 8.4x 7.1x 8.6x 8.3x n.m. EV/EBITDA FY17e 8.8x 7.7x 9.6x 6.4x 8.1x 8.1x 8.8x 8.9x 7.0x 8.8x P/E FY16e 9.6x 19.3x 16.5x n.m. 9.4x 16.1x n.m. 8.7x 6.6x n.m. P/E FY17e 14.8x 13.7x 16.4x 13.7x 15.0x 16.4x 13.3x 12.6x 12.6x 10.6x Price/book value FY16e 1.3x 1.4x 1.2x 0.8x 0.7x 1.4x n.m. 2.4x n.m. 2.6x Profitability ratios ROE forward 12m 2% 10% 7% 6% 5% 9% n.m.(3) 19% 33% (2) n.m. (3) ROCE forward 12m 10% 9% 5% 6% 4% 7% n.m.(3) 11% 17% n.m. (3) EBITDA margin FY16e 20% 21% 25% 14% 21% 20% 16% 9% 8% 5% EBITDA margin FY17e 20% 21% 27% 16% 21% 21% 13% 8% 9% 12% EBIT margin FY16e 12% 13% 15% 8% 10% 12% 6% 6% 5% 0% EBIT margin FY17e 12% 13% 15% 9% 8% 13% 8% 6% 5% 7%
Key messages from brokers and analysts
Despite weather headwinds, 1Q17 results were mostly ahead of market expectations (Morgan Stanley - May 29, 2017)
Generation and supply weakness in Q1 did not trigger changes in guidance (Morgan Stanley - May 29, 2017)
Yet, in the short term we do not see enough catalysts
Source Capital IQ to drive a re-rating . Q2 results would be key, but weather is a risk. (Morgan Stanley – June 12, 2017)
Gas market, The Rough is shut as spot test support (Credit Suisse - June 22, 2017)
Sector consolidation: momentum depends on Engie/ RWE outcome (HSBC – June 15, 2017)
How might UK energy supplier margin evolve if energy tariffs are capped? (Morgan Stanley - May 16, 2017)
Source Capital IQ
(1) Deloitte Index is composed of Engie, EDF, EON, Iberdrola, RWE, Gas Natural, Enel, SSE and Centrica (2) Ratio linked to the expected level of non recurring income resulting from disposals program by Centrica (3) Not meaningful due to spin-off operations (Uniper/E.ON and RWE/ innogy)
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M&A Trends
Transactions involving Power & Utilities companies Transactions involving equity funds Polska Grupa Energetyczna (PGE), Poland’s biggest power The UK government sold the Green Investment Bank PLC to a producer, has agreed to buy for $1.2bn EDF’s Polish power and consortium led by Macquarie Group for £2.3 bn. heating assets, composed of eight co-generation or combined (Dow Jones Newswires – April 20, 2017). heat and power assets. (Reuters – May 19, 2017). City of Oslo, has agreed to acquire 34% stake in Hafslund ASA, a Swedish listed power group, from Fortum Corporation, an Redes Energeticas Nacionais (REN), a Portuguese utility company, energy company focusing on the Nordic and Baltic countries, for reached an agreement to acquire EDP Gas, a distributor of natural approximately €730m. gas, from EDP Iberia, a subsidiary of Energias de Portugal S.A for (Reuters – April 26, 2017). $567.6m. EDP Gas owns the 4,460km gas distribution network in northwest Portugal. SAPE, the Romanian state owned holding company, exercised a (Marketline – April 12, 2017). put option resulting in the sale of E-Distributie Muntenia and Enel Energie Muntenia, two Romanian utility companies, to Enel Energeticky a Prumyslovy Holding (EPH), a Czech utility company, Investment Holding B.V for €400m. acquired by Centrica a combined cycle gas turbine with a (Electronic News Publishing – April 13, 2017). combined capacity of 2.3 GW for £318m. (CIA News – June 22, 2017). Poslki Fundusz Rozwoju, a state owned investment fund, agreed to acquire from Tauron, a Polish utility company, a 14% stake in Mitsubishi Heavy Industries (MIH) has reached an agreement Jaworzno coal-fired power plant expansion having 1,345MW with EDF to take over for $366m a 15% stake in New Areva NP capacity, for $236m. hosting Areva’s nuclear reactor business purchased by EDF. (Market Line – June 3, 2017). (Key Energy News - April 25, 2017). The Dutch province of Fryslan, has agreed to acquire for €127m Enel has agreed to buy, through a Public Offer,Enernoc , a US a minority stake in Fryslan offshore wind power plant in software provider offering demand response and energy services Netherlands with maximum capacity of 320MW. for utility, for $250m. (Marketline – April 21, 2017). (SeeNews – June 23, 2017). The Renewables Infrastructure Group Limited, a renewable EDF Energies Nouvelles acquired 67% of Futuren, a listed energy infrastructure investment company, acquired Garreg Lwyd company specialized in wind energy and owning a 389MW capacity, Hill, a wind farm from Renewable Energy Systems Holdings, a for a total purchase cost of €200m. renewable energy company in Wales with a capacity of 34MW, for (Marketline – June 22, 2017). £100m. (Marketline – May 19, 2017). Toshiba will buy the 40% remaining stake in NuGeneration (Nugen), the UK nuclear joint venture, from Engie for roughly Eolus Vind, a Swedish wind power developer, signed an agreement €130m. NuGen’s Moorside project aims to develop a new with Munich Re, a reinsurance company, regarding the sale of generation nuclear power-station of up to 3.8GW gross capacity. wind farm Jenasen having an installed capacity of 79MW for (SeeNews – April 4, 2017). €106m. (Financial Wire – June 1, 2017).
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European Power and Utilities companies wrap-up
EBITDA of the first quarter 2017 for most of European utilities is down compared to first quarter 2016 due to adverse conditions: warm winter, except in France, weak hydro and increasing competition namely in the UK.
Nevertheless results are better than expected that enables almost all energy companies to confirm their guidance.
During the second quarter the European Commission gives its approval to the state aid mechanism for German waste deal that is a derisking step for German utilities and enable them to focus on the decommissioning of their nuclear reactors. In addition the German Constitutional Court ruled that the German nuclear tax in place between 2011 and 2016 was illegal and asked a refund to companies that should represent after interest and tax c.€2.3bn for E.ON and c.€1.7bn for RWE.
In the UK the discussion in Parliament about a price cap on variable energy tariffs is likely to expose UK merchant utilities to a new risk in addition to current high competition and uncertainty on supply.
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• First quarter 2017 sales at €21.1bn, stable in organic • Revenue of Q1 2017 at €19.5bn i.e. +3.2%, namely due to the terms increase of gas purchase/ sale activities, commissioning of new • Nuclear output at a level consistent with 2017 target: assets in Latin America and tariff revision for gas infrastructures. It is also driven by the performance of thermal gas generation in - France: 108.5TWh, i.e. -7.6TWh compared to Q1 2016 Europe and a slightly favorable temperature impact in France. taking into account outages for additional controls started Q1 2017 in 2016 • EBITDA is down by 6% at €3.3bn (-3.6% on organic basis), the Highlights - United Kingdom: 16.0TWh, i.e. +0.3TWh compared to Q1 positive variation in sales being more than offset by unfavorable 2016 with a high performance level maintained scope effects , a decrease in hydro and hydrocarbon production, and the shutdown of Tihange 1 nuclear power plant since September 2016 • Solid cash generation and net debt further decreased mainly due to the effects of the portfolio rotation program.
• Share capital increase of €4.0bn • Announcement of the closing of assets disposals in the US and • Definitivesale of 50% of RTE, French TSO, to CDC and CNP in Asia Assurances • Acquisition of the remaining 41% in the French Wind • Sale of EDF Trading’s coal and freight assets to JERA Trading, generation group La compagnie du vent EDF receiving a 33% stake in JERA Trading • Equity investment (30%) in UNISUN, a solar photovoltaic company • Definitivesale of EDF DEMASZ, EDF’s Hungarian subsidiary • Signing of financing agreements for Nord Stream 2 to ENKSZ, a Hungarian Utilities company. Key events • Issuance of a €1.5bn Green bond in the • Signing of an agreement with PGE, state-owned Polish • Decision to transfer its 40% stake in NuGen project in the UK to period Utilities company, for the sale of EDF Polska’s Toshiba • Acquisition of a majority stake in Futuren specialized in onshore wind energy • Alliance with the consortium led by Masdar, an Abu Dhabi renewable company, to develop a 800MW solar park in Dubai. • Start of testing phases on coolant system loading and internal structure of Taishan nuclear power plant
FY 2017 • FY 2017 guidance confirmed • FY 2017 guidance confirmed Outlook
• Q1 2017 sales declined by 7% at €10.5bn because of • Sales in the first quarter went down by 3% at €13.3bn due to adverse currency translation impact, lower sales volumes customer losses at innogy’s UK and Dutch retail business, a drop in the UK and change in scope due to the disposal of E&P of electricity feed into innogy’s German distribution network and a activities in the North Sea. negative currency translation impact on £. Q1 2017 • Recurring operating income is down by 22% at €1.0bn • Adjusted EBITDA of €2.1bn shows a 6% drop than in the same Highlights due to higher power network fees, lower gas sales prices, period last year. The main reasons are declining generation margins higher costs for customer service and acquisition in and additional burdens in the UK retail business, partially offset Germany, and lower sales volume and higher cost in the UK. by significantly lower expenses for operation and maintenance of • Net debt decreased by 6% at €24.7bn namely due to the distribution networks. €1.4bn capital increase.
• Bond issuance of €2.0bn to fund nuclear-storage solution • Innogy became the new guarantor and debtor of RWE’s senior • Development by E.ON and Google of a Digital platform to bonds Key events develop photovoltaic solution for residential buildings • All RWE’s UK plants (generation capacity of c.8GW) have been in the • €1.4bn capital increase to strength the equity and liquidity qualified in the fourth UK capacity auction at £6.95 per KWh period basis of E.ON SE in view of the impact by the payment of • Repayment of CHF250m hybrid bonds the risk surcharge to Germany’s state-run nuclear fund in mid-2017.
FY 2017 • FY 2017 guidance confirmed • FY 2017 guidance confirmed Outlook
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• Q1 2017 sales totaled €19.4bn, i.e. +8% compared to Q1 • Higher realized unit margins in North America Home energy 2016, due to a positive currency translation impact and supply and good optimization performance in North America an increase in revenue from electricity sales to end users, business continuing the performance momentum from H2 2016 transport of electricity and electricity trading. This was despite warmer than normal weather Q1 2017 partially offset by a drop of sales in wholesale market and • UK Business gross margin impacted by warm weather, Highlights the deconsolidation of Slovenske Elektram. electricity cost volatility and the phasing of energy settlements • The EBITDA amounts to €3.9bn, i.e. -3% compared to Q1 • Strong energy marketing & trading performance; NEAS Energy 2016, due to declining margin in Iberia and a negative scope continuing to perform ahead of expectations impact with the deconsolidation of Slovenske Elektram.
• Acquisition of CELG Distribuiçao, electricity distribution • UK Home energy supply accounts down 261,000 in the year to company in Brazilian State of Goias date, reflecting the planned roll-off of collective switch tariffs and a • Acquisition of Demand Energy networks, a US company greater shift towards enhanced segmentation and customer value, specialized in software solution and smart electricity not only volume storage systems • UK Home energy standard tariff frozen until August Key events • Board decision to authorize by December 31, 2018 the • Commenced construction of a new fast response distributed energy in the issue of bonds for a maximum of €7.0bn to refinance gas plant at Brigg and a new battery storage facility at Roosecote period the Group maturing debt • E&P production broadly on plan to the end of April despite • Acquisition of 14% in E.Distributie Muntenia and Enel extended maintenance outage at Morecambe, with the Cygnus gas Energie Muntenia, Romanian utilities, for €400m, increasing field performing ahead of expectations its share to 78%. • Divestments program on track, with completion of Trinidad and • Investment of $157m in a photovoltaic project in Australia Tobago E&P assets expected later in H1 and Canada E&P sale (275MW) representing a total investment of $315m targeted for 2017
FY 2017 • FY 2017 guidance confirmed • FY 2017 guidance confirmed Outlook
• Q1 2017 sales totaled €8.3bn, i.e. +1% compared to • Q1 2017 sales totaled €6.5bn, i.e. +8% compared to Q1 2016, due Q1 2016, due to the good performance of the Networks basically to the year-on-year increase in sales volumes and prices business of the US, Mexico and Brazil. This was partially in the gas business as well as the evolution of exchange rates. It offset by negative impacts of weak performance conduct was partially offset by a scope impact with the deconsolidation of in the generation and supply business in the UK, adverse Electricaribe as part of the dispute with the Colombian state. Q1 2017 weather conditions in Spain with Hydro production and Highlights • EBITDA is decreasing by 9% at €1.1bn affected by a margin Wind power falling respectively by 41% and 17%. decrease in gas wholesale and electricity supply in Spain namely • EBITDA is decreasing by 8% at €1.9bn affected by the due to a contraction by 75% of hydroelectric production, as well as poor performance of the generation and supply activity in a scope impact with the deconsolidation of Electricaribe the UK due to Longannet plant closure, higher taxes and non-energy costs. • Strategic partnership with Vineyard Wind to develop a • Two Bonds issued each worth €1.0bn large-scale offshore wind power project to be built off the • The arbitration process to obtain a compensation from the coast of Massachusetts in the USA. Colombian State for the dispute on Electricaribe is still going • Award of the construction and operation of 766-MW on. Gas Natural request amounts to €1.0bn. Key events combined-cycle power station in the state of Sinaloa, • Decision to invest €700m following award of 667 MW of wind in the Mexico power through Spanish Government auction period • Award through an auction process the rights to develop and construct an offshore wind farm with a capacity of up to 1,486 MW off the coast of North Carolina, in the United States • Completion of a green bond issue worth €1.0bn
FY 2017 • FY 2017 guidance confirmed • FY 2017 guidance confirmed Outlook
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Talking points 1 - Tariff reforms in electricity transport and distribution: justifications and European dynamic Sources: International Energy Agency (Repowering Markets), European Commission (Study on tariff design for distribution systems), Eurelectric (Network tariff structure for a smart energy system).
European context tariffs should be based on volume or/and on capacity. If NRAs do not take in consideration all these aspects and do not modify European electricity systems are facing new challenges as energy network regulation to consider the new context, it may result in transition becomes more and more the reality. While a debate a less secure electricity system and undermine the transition to concerning the future of utility-scale renewable firms on the one a low-carbon system, as DER could not be developed as needed. hand and off-grid solutions on the other hand is arising, shorter- term decisions have to be made in order to address the new Figure 1 - Core mission and new objectives of distribution network regulation challenges brought by the transition to a low-carbon economy. (source : IEA) Indeed, the Third Energy Package has enabled a massive penetration of Distributed Energy Resources (DER) which are Core mission now changing the traditional way networks are managed. Sufficient Non-discriminatory Traditionally, electricity is delivered in a unidirectional way Quality of service from a centralized production system through networks to investment access end-users, whose behavior is passive, being that they poorly respond to market signals and do not adapt their decisions so Core mission as to minimize their energy costs. Networks are dimensioned, operated and developed in a regulated way, as they are Decarbonisation Innovation/IT identified as natural monopolies. They also play an insurance role, since they ensure customers electricity supply under good conditions (thus improving the so-called security of supply as The aim of the adoption of the Energy Efficiency Directive well as power system security). (2012/27/EU) by the European Commission (EC) has been to address these issues frontally. It requires to remove network The traditional network regulation which has been promoted tariffs that impede demand response, energy efficiency and since liberalization is incentive-based, with the main objective of penetration of RES. From the point of view of NRAs, it translates recovering network costs (input-based). This form of regulation into the introduction of 3x20 objectives through their network has delivered efficient gains in the form of cost reduction.But tariff schemes. It is clear that networks are, in the EC’s mind, the new technologies that allow real time flexibility, coupled with backbone of low-carbon electricity markets and efficient use of intermittent Renewable Energy Resources (RES), are now energy. reversing the old regulatory paradigm. They are reshaping the role of network operators, both regarding their perimeter Therefore, energy transition, which leads to a changing role for of tasks (c.f. Figure 1) and their sustainability. But today’s networks coupled with technology revolution, bring a wind of regulations do not addressed these issues, as they are mainly change which is spreading across the Old Continent. Among the designed to recover network costs and not to enhance the most urgent ones, regulation of distribution networks has to be development of technologies related to the energy transition. modernized to accommodate the deployment of DER. While flows will become bidirectional (with DER such as storage or electric vehicles) and demand will be more flexible, regulatory New technologies are reshaping electricity systems and regimes will have to be designed to face technology changes, in call for a rethinking of regulation particular for distribution networks. IEA1 highlights these issues by calling for a 2.0 regulation with a main objective: establishing DER - such as RES, distributed storage, distributed demand a smart, flexible distribution network. To do so, CEER Guidelines response - and smarter technologies3 are creating new of good practice on electricity distribution network tariffs challenges for NRAs. provides tools2 for National Regulatory Authorities (NRA) to adapt their regulation. New design also needs to clarify whether the
1. IEA, Market design and regulation during the transition to low-carbon power system, Repowering Market, 2016. 2. Council of European Energy Regulator has established in January 2017 a Guidelines of good practice on electricity distribution network tariffs. This reference paper highlights “seven key principles for distribution network tariff structures” as well as the “Key considerations in the application of the principles in the design of tariffs for use of distribution networks”. Every European regulator should refer to CEER’s guidelines in the reform process. https://www.ceer.eu/documents/104400/-/-/1bdc6307-7f9a-c6de-6950-f19873959413 3. Technologies such as smart-meter which allow to measure dynamic consumption (and no more static as before)
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Massive penetration of RES Ambivalent role of electric vehicles NRAs have to deal with the emergence of more mature Increasing use of electric vehicles will have two impacts on technologies for RES, which belong to Distributed Generation the grid. On the one hand, these vehicles have to load directly (DG) technologies (c.f. Figure 2 ), enabled by support schemes4 on the grid, leading to an increase in electricity demand and from European states and serious decreased in investment capacity needs. On the other hand, they may be seen as costs. distributed generation since they can inject directly electricity to the grid and be used as batteries. As a connected storage Figure 2: Examples of distributed generation technologies capacity, electric vehicles could bring more flexibility to the grid. (Source: IEA) As shown in the paragraph above, storage capacity bring new challenges for regulator (the double-pricing issue for electric Renewable Solar PV vehicle is especially relevant), that have not been yet addressed. Onshore Wind Electric vehicles also induce capacity needs, which might result Small hydroelectric in an increase of consumption peaks. Therefore, tariffs must Wood Municipal solid waste be constructed in a way to incentivize an efficient use of these vehicles. Non-renewable Natural gas-fired fuel cells Small reciprocating engines Demand response technologies: addressing distribution Natural gas-fired small and micro turbines system needs Demand response technologies enable to optimize the use Two problems can be identified with regards to the rapid of all the consumption and production technologies listed integration of RES on national networks. above. Smart-meters, coupled with smart-appliances, will allow consumers to directly react to price signals (market prices and (i) Firstly, local production, when higher than local demand, regulated prices). They will enable households to optimize their requires more transmission networks or more storage electricity bills by managing their use of electrical equipment in systems, because it might result in more local congestions. live. Distribution companies will also benefit from smart-meters. Therefore, there is a need for network reinforcement which in They will have the possibility to adapt their tariffs according to turn requires investments that have to be recovered by TSOs the consumption profile of their customers. Smart-meters will & DSOs. Thus, tariffs will have to be accordingly designed. also help to improve self-consumption for clients which have (ii) Secondly, RES, as an intermittent way of producing electricity, their own power generation equipment (for instance PV). may result in more system imbalances, as generation is not precisely predictable in the very-short term. RES thus require Smart-meters and smart-appliances, by increasing the demand “back-up” power plants (gas-fired or coal-fired) and flexible elasticity in price of customers, will lead to new challenges for the tools (such as smart-meter or storage capacity, c.f. below). energy value chain (aggregators, suppliers, network operators This leads to more investment in both peak capacities and and producers) as well as for NRAs, in particular regarding grids as well as an adapted management from the DSOs & energy tariff determination. Indeed, customers will be more TSOs and thus from NRAs. and more reactive to incentives send by NRAs through network tariffs. Therefore,by fixing tariffs, NRAs will have to be careful Distributed storage to reduce peaks about message they want customers to understand and the Distributed storage technologies (such as efficient batteries) impact it will have on cost recoverability. The coordination have appeared while large-scale storage (pump station) has between the regulated tariffs and the new commercial offers by continued its development. They both bring solutions to improve suppliers also needs to be ensured. network operations (i) but also new regulatory challenges to be dealt by NRAs (ii). An evolving cost structure Energy transition requires deep structural transformations. (i) Electricity storage is one of the solution to support RES These needs for new means of consumption coupled with development. Indeed, production surplus from RES may be massive technological ruptures are resulting in the appearance stored to be reinjected during peak period when production of new potential ways of looking at electricity. The increasing role cannot face demand. All this at a lower cost, as RES production of Distributed Energy Resources (DER) is affecting Distribution is cheaper than peak power generation. System Operators (DSO)’ total cost. Indeed, it requires network (ii) Electricity storage raises new challenges for NRAs, such as investments to integrate these resources, in order to cope with double-pricing. Indeed, as a way of extracting and reinjecting new flows and their volatility, and with demand fluctuation. In electricity to the grid, storage could be priced twice, for this regard, DSOs costs balance between (i) OPEX and (ii) CAPEX injection and extraction. In addition, storage may raise is evolving. environmental issues, as pump station completely upset their environment. (i) DER services will likely enable a decrease in unit OPEX as they can replace some costly internal operations (such as meter reading).
4 Support schemes such as Feed-in-Tariffs, Feed-in-Premium or contract for differences. 12 10 Newsletter Power & Utilities Newsletter Power & Utilities
(ii) It is not clear how CAPEX will evolve. On the one hand, the Figure 3 European huge differences in distribution tariffs level of investments needed might be limited by the use (Source: European Commission) of DER by reducing the total length of transmission and distribution lines (local production, local storage etc.). On the other hand, additional investments in smart devices are required by smarter distribution grids.
In traditional incentive-based regulation, CAPEX and OPEX are subject to efficiency and productivity incentives, and regulation is focusing on cost recovery. But in the light of future investments in grid technologies, regulation has to evolve in order to cope with the evolution of both the cost structure and the role of network. Therefore, an output-based (i.e. smart network) regulation will be needed, in addition of the traditional input- based one (i.e. power delivery).
Overall, the energy transition has therefore mixed impacts on the operation and development of power grids. New services will emerge and new investments will be needed, leading to a structural upheaval of grids, which could either manifest itself by higher or lower grid costs, depending on the level of DG penetration, the location, the size and the form of the technologies. Tariffs structures These additional costs or benefits have to be directly reflected Share of fixed and capacity components in into the regulation and in particular in the tariff design, in distribution tariffs order to ensure most of essential cost allocation criteria. The biggest risk is that current tariff design is unable to address the new constraints and leads to issues regarding cost recoverability Indeed, a volumetric component could lead to substantial issues and sustainability of essential infrastructure. of cost reflectiveness and cross subsidies between network users. With volumetric tariffs, KWh charges might rise to offset The landscape of regulatory regimes for distribution and the loss of consumption due to DER users. While volumetric transmission grids is therefore driven to evolve to tackle these component could incentivize customers to reduce their issues. And indeed, studies at the EU level5 show the limitations consumption, network cost incurred to customers with DER characterizing the existing tariff design (volumetric tariff, static would be shifted to customers who do not have access to DER. tariffs etc.) but they also highlight the movement toward a Thus, equity principle would no longer be respected. Capacity- reform of tariff methodologies to better address technological based tariffs, if well-adjusted, could resolve these issues, as evolution and energy transition. DER users would only save the marginal cost they incur to the grid. In addition, capacity-based tariffs ensure that sufficient European situation and new regulatory schemes investment can be made in peak-capacities, because DSOs will be remunerated according the installed capacity. A lack of regulatory coordination at European level Besides, and although non consensus can be shown between Current distribution and transmission tariffs are largely European countries for the moment, the analysis of several designed to ensure cost recovery, cost reflectivity and national tariff designs allow to show an evolution in Europe from fair allocation based on network usages. But there still volumetric tariffs to tariffs based on capacity. As explain latter, is considerable variations between countries. In particular, capacity based tariffs seem to be better suited with the new it appears to be no consensus on the way distribution and investment needs on grid. transmission have to be priced, especially on the debate between volumetric component6 and capacity component7.
Thus, the current benchmark of European countries shows that the volumetric component is dominant at European level but this is counterintuitive from an economic point of view and few economic justifications are brought forward by regulators which have adopted such a tariff model.
5 For instance, Study on tariff design for distribution system, prepared for European Commission 2015 https://ec.europa.eu/energy/sites/ener/files/documents/20150313%20Tariff%20report%20fina_revREF-E.PDF 6 Volumetric tariffs are based on the energy consumed (euro/kWh). 7 Capacity tariffs are based on the peak-demand of consumers (contracted capacity with their distributor, in euro/kW).
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The Netherlands Spain The Netherlands was the first European country to adapt DSOs in Spain have faced huge issues regarding the recovery of its distribution pricing with a 100% capacity component8 for their costs. In order to clean up distributors’ budget, the country low voltage consumers (i.e. residential clients). engaged a regulatory reform as of 2013. Spain is also a leading European country in RES installed capacity, as the national Since 2009, distribution is regulated under a regime which resources in wind and solar are huge. Spain is, thus, a good focuses on output9 and total cost. There are two rationales for example of reforming country. moving from energy-based tariffs to capacity-based, according to Dutch government and regulator: Before 2013, volumetric component was dominant. Since 2013, (i) DSOs’ costs depend much more on capacity than volume. It a greater capacity component has been introduced directly means that it is the capacity during peak-demand which drives in distribution tariffs. Spain also implemented a “sun-tax” DSO’s costs. Therefore, Dutch regulator is trying to respect the to overcome the problem of self-consumption that reduces best as he can the cost causality principle. electricity draw from the grid and reduces DSOs revenues. (ii) The Netherlands sought to simplify administrative processes Every self-producer of PV has thus to pay charge for each KWh for both DSOs and suppliers by implementing capacity-based produced on their premises alongside the electricity sourced tariffs. Prior to the reform, consumers received two bills: one from the grid. from DSOs and one from energy suppliers. With capacity- Cost allocation is made according to a differentiation between based tariffs, consumers pay only for the capacity contracted consumers which is mostly based on the capacity called at peak and costs relative to energy metering are directly removed, hours. It is thus a differentiation in time which is applied. because tariffs no longer depend on energy consumption. Thus, by simplifying administrative processes, government Figure 5: Proportion of capacity and consumption network charges in Spain seek to reduce administrative costs. before and after reforms (Source: IEA)
New tariffs are made of two main components: • A fixed charge • A charge which is function of the capacity subscribe and/or the maximal capacity used during the month.
In addition, in order to ensure the right incentives for energy efficiency to customers10, the Netherlands government decided to introduce an energy consumption tax, which depends directly on the amount of consumed electricity.
Note also that the government gave subventions to most Portugal vulnerable consumers between two years in order to accompany reform processes. Portugal decided in 2015 to introduce dynamic Time of Use (ToU) tariffs, allowed by the installation at large scale Figure 4: Share of capacity and energy in Netherlands’ tariffs in 2015 of smart-meters. Static ToU tariffs provide incentives to shift (Source: European Commission) load from peak period to off-peak period, but they do not enable demand flexibility in the short term. Meanwhile, dynamic ToU tariffs will allow customers to be complete responding market players and thus promote demand side flexibility. The introduction of these tariffs has three main objectives: (i) Minimizing grid cost by allowing customer to participate in mechanisms which encourage efficient use of the grid; (ii) Providing new mechanisms to the grid operator to allow the reduction of demand in higher consumption’s situations; (iii) minimizing production variation impacts from RES to benefit operational security of the grid. Portugal is the first European country to implement this original form of Time of Use tariffs, and its example has to be followed carefully.
8 With capacity-based tariffs, consumers pay for the amount of kW they contracted. With energy-based tariffs, they pay for the amount of kW per hours (kWh) they consumed. 9 Output-based regulation tries to focus on quality of services while input-based tries to improve the productivity of regulated firms. 10 Energy-based tariffs incentivize customers to reduce their consumptions, because the more they consume, the more they pay. As energy efficiency is one of the main objectives of European energy directives, it is logical that Netherlands adapt energy taxes.
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Italy Figure 6 Distribution tariff characteristics for households in 2015: a large Most of households are equipped with smart-meters in Italy, diversity (Source: European Commission) thus allowing to limit the maximum power delivered to the house. Historically, a progressive volumetric component was applied to households, in order to respect the principle of cost-reflectiveness. Italian distribution tariffs are divided into three parts: (i) a fixed component, (ii) a capacity component and (iii) a volumetric component. However, as of 2015, the Italian government decided to eliminate these progressive volumetric tariffs, moving toward a major capacity component. Following the decision of the Italian NRA, the capacity component of the tariff tripled in 2015 and the fixed component increased by 66% for households. The Italian “ideal” tariff structure is thus designed to ensure the cost-reflectiveness, as the fixed charge To conclude, there is a clear lack of transparency in European covers the cost of metering and the capacity charge covers the methodologies. Tariffs structure are very diverse, without cost of network and especially the cost of insurance brought by economic justification for most of cases. However, one can the existence and operation of the network. identify a trend: countries are moving from volumetric tariffs to capacity based tariffs, which seems to be justified, both Sweden with regards to the economic theory and the penetration of new technologies. As Energy transition can no longer Sweden is an interesting case because the regulator only fixes be postponed, the little reform’s wave identified in few great principles and DSOs then determine tariffs with the only countries needs to be accelerated. obligation to respect objectives dictated by the NRA. The main principle is that tariffs have to incentivize energy efficiency, efficient use of grid and production efficiency. This original regulatory process allow for market studies on consumers, as their behaviors can be directly observed through their tariff choices. As some DSOs have already implemented dynamic Time of Use tariffs, studies have been made to analyze consumer behaviors. Most of these studies show that customers do react on the tariffs price signals by decreasing peak demand in peak periods and shifting electricity use from peak to off-peak period.
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2 - Gazprom: end to its alleged abuse of dominant position? Sources: European Commission (2017), Market test notice, “Communication from the Commission published pursuant to Article 27(4) of Council Regulation (EC) No 1/2003 in Case AT.39816 — Upstream gas supplies in central and eastern Europe”: http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=OJ:C:2017:081:FULL&from=EN
Gazprom (2017), Commitment Proposal, “Proposals for Commitments COMP/39.816 – Gazprom commitments under Article 9 of Council regulation N°1/2003” http://ec.europa.eu/competition/antitrust/cases/g2/gazprom_commitments.pdf
European Commission (2012), Press Release, “Antitrust: Commission opens proceedings against Gazprom”: http://europa.eu/rapid/press-release_IP-12-937_en.htm?locale=en
European Commission (2011), MEMO/11/641, “Antitrust: Commission confirms unannounced inspections in the natural gas sector”: http://europa.eu/rapid/press-release_MEMO-11-641_en.htm?locale=fr
Central and Eastern European (CEE) gas customers are awaiting EC competition concerns the decision of the European Commission (EC) on whether Gazprom is a global energy company active in the wholesale it considers commitments proposed by Russian natural gas supply of natural gas and holds the world’s largest natural gas provider Gazprom sufficient to address its relevant competition reserves. Many EU Member States are dependent to a large concerns. The price to pay for Central and Eastern European extent on gas supplies from the Russian provider. customers may be high! Following a preliminary investigation, the European Commission expressed its concerns as regards Gazprom breaking EU 2011: Dawn Raids competition rules by pursuing an overall strategy to partition CEE In September 2011, the EC announced the start of its gas markets. inspections at the premises of companies active in the supply, The EC’s competition concerns, as expressed in its Statement of transmission and storage of natural gas in several Central and Objections, relate to Gazprom abusing its dominant position by: Eastern European Member States. The dawn raids included (1) imposing territorial restrictions; (2) practicing unfair pricing Gazprom, a leading world gas producer and exporter holding policy; and (3) leveraging its dominant position by imposing the world’s largest natural gas reserves. commitments from wholesalers concerning gas transport infrastructure. 2012: Opening of proceeding against Gazprom Following its dawn raids, in September 2012 the EC opened Territorial restrictions an official proceeding against Gazprom to investigate whether Gazprom imposed territorial restrictions on its supply it may have broken EU antitrust rules by abusing its dominant agreements in a number of CEE countries (Bulgaria, the Czech position in the upstream gas supply gas market in Central and Republic, Estonia, Latvia, Lithuania, Poland, Hungary and Eastern Europe, which could harm EU gas customers. Slovakia). These took the form of export bans, destination clauses and other measures that have prevented the cross- 2015: Statement of Objections border flow of gas. In April 2015, the EC has sent a Statement of Objections concerned by its practices in Central and European gas Unfair pricing policy markets. Overall, the EC concluded that Gazprom’s practices were considered to “[…] raise barriers to the free flow of gas As noticed by the EC, imposing territorial restrictions may have within the Internal Market, to lower the liquidity and efficiency served as a measure to practice an unfair pricing policy in five of gas markets and to result in higher natural gas prices”. If CEE countries, namely Bulgaria, Estonia, Latvia, Lithuania and such practices are pursued, they may put CEE gas customers Poland, by charging them with significantly higher prices than at the risk of paying higher gas prices and / or facing those of their western neighbors. disrupted gas supplies. Leveraging of dominant position 2017: Market Test It was also noticed that Gazprom may have leveraged its In response to the Statement of Objections, Gazprom dominant position in the upstream gas supply market in Bulgaria has proposed commitments to address/meet the EC’s and Poland. The EC’s investigation has shown that Gazprom may competition concerns. The EC then invited third parties to have obtained advantages as regards the access to or control of comment on Gazprom’s commitments concerning CEE gas gas infrastructure and in particular with regard to (1) the South markets. Stream pipeline project in Bulgaria and (2) the Yamal pipeline in Poland.
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Under the charm of Gazprom commitments Commitment for Free flow of gas in Central and Eastern Europe Although Gazprom did not agree with the EC’s preliminary assessment, it has proposed commitments to address its Regarding swap-like operations and reselling, Gazprom does not competition concerns. It has committed to introduce changes in provide a justification of the level of its service fees. It does not its contracts with the aim of eliminating obstacles to the free flow show how the calculated service fees reflect costs of undertaking of gas in order to ensure competitive prices in CEE. a particular swap-like operation. Service fees may appear too high for swap-like operations to actually take place in practice. Free flow of gas in Central and Eastern Europe Commitment for competitive gas price in Central and In order to address concerns of the EC regarding territorial Eastern Europe restrictions, Gazprom has committed to remove all contractual Firstly, there is no clear methodology with regards to the barriers to the free flow of gas and to undertake actions enabling selection and the use of competitive benchmarks in the price their better implementation. revision procedure. Under its current form, there remains In particular, this included the commitment to remove substantial flexibility in interpreting which benchmarks should be contractual restrictions preventing customers from re-selling gas considered for the trigger and price revision procedure. they have bought over borders. In this regard, Gazprom has also Secondly, the commitments overlook a major ingredient of proposed to eliminate clauses that would limit the incentives long-term contracts, which is the retroactive effect of the price for the re-sale of gas (e.g. sharing profits from re-selling gas review. Gazprom may thus have the possibility to continue to with Gazprom). Gazprom has also committed to offer swap-like practice excessive prices. In case the conditions for triggering operations, enabling a change in the delivery point for gas a price review are met, a customer could encounter a lengthy initially contracted to Hungary, Poland and Slovakia to be litigation and/or arbitration process for new revised prices to be transferred instead to Baltic States and/or Bulgaria in exchange set. Absent a retroactive effect in the commitment, a customer for a fixed service fee. whose demand for a price revision was satisfied may still incur Finally, Gazprom has also addressed the particular case of losses in the form of excessive prices which it faced during the the Bulgarian market by changing its contracts in order to negotiation and litigation period. remove obstacles for the Bulgarian gas operator to facilitate interconnection agreements between Bulgaria and other EU Even if corrected in view of their desired economic impact and Member States. objectives, Gazprom may remain to have economic incentives and possibilities to leverage its dominant position. Competitive gas prices in Central and Eastern Europe
As regards the concern of excessive pricing policy, Gazprom has Commitment to leverage its dominant position committed to introduce changes to its price revision clauses. Even if the proposed commitments would be corrected in a Under the proposed commitments, customers in Central and way to overcome their existing shortcomings, there are many Eastern Europe would have the possibility to trigger a price reasons to believe that Gazprom may have both the incentive review in case their price diverged from “competitive price and possibility to leverage its dominant position. The proposed benchmarks”. The benchmark was defined as the average commitments may hence not be sufficient to address the weighted import border prices in Germany, France and Italy and identified competition concerns. The sources of such possibilities the price level at the relevant generally accepted liquid hubs in are infrastructure-based. Continental Europe. The frequency of the price review request would be increased to one every two years and an extraordinary Firstly, Gazprom may have the possibility to restrict gas supplies. one every five years. Many EU Member States are and will remain in the near future to a large extent dependent on gas imports from Russia. Removal of demands obtained through its dominant Controlling gas supplies may thus serve as another potential tool position for Gazprom to hinder competition in CEE countries. It is worth Finally, Gazprom has committed not to seek any damages from reminding the gas supply disruption to the European Union in its Bulgarian partners following the termination of the South January 200911. Stream project in Bulgaria.
Secondly, thanks to its infrastructure, Gazprom may be in the Are the commitments actually sufficient? position to maintain market segmentation. By isolating CEE Although attractive at first sight, the proposed commitments countries from the rest of the European Union, it may have the may not be sufficient to address the competition concerns possibility to practice unfair pricing in these countries. identified by the EC. They present several loopholes that may make them ineffective in practice.
11. See “Commission staff working document - Accompanying document to the Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard security of gas supply and repealing Directive 2004/67/EC - The january 2009 gas supply disruption to the EU : an assessment”.
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Finally, Gazprom may be in the position to practice unfair Finally, the introduction of a prohibition decision could increase the pricing policy towards its CEE customers in the time window likelihood of private competition law actions. By establishing the between the possible price revisions, the frequency of which existence of the infringement, they may be helpful for victims of has been defined in the proposed commitments. In case antitrust violation, such as Gazprom’s customers. Deciding to pursue Gazprom maintains excessive prices after the introduction of follow-on actions, victims would not bear the burden of proving the the decision, its customers may have to wait years until the existence and exact form of the infringement before the court. arbitration tribunal re-establishes prices to a competitive level. The possibility for Gazprom to maintain excessive pricing after All in all, commitments proposed by Gazprom, although the introduction of the decision contradicts the key advantage of attractive at first sight, seem to hide several loopholes that a commitment decision, which is the resolution of competition may make them ineffective in practice. Also, even if improved, concerns in a quick and effective manner. Gazprom may still have the possibility and incentive to leverage its dominant position. Approving the proposed commitments It is worth reflecting at this point on the consequences of the and issuing a final decision by the EC on their basis may come at European Commission adopting a commitment decision rather the risk of excessive gas prices paid by Gazprom’s CEE customers. than a prohibition decision.
Why not a prohibition decision?
Article 102 of the Treaty on the Functioning of the European Union prohibits abusive conduct of a dominant position in a particular market. The European Commission may adopt two types of decisions when deciding to pursue a case. It may enforce its rules either by introducing a commitment decision under Article 7 of the EU’s antitrust Regulation 1/2003 or a prohibition decision under Article 9 of the same regulation.
When pursuing a case under a commitment decision, companies present commitments that are intended to address the European Commission’s competition concerns arising from an initial investigation. The European Commission then launches a market test to consult market participants on whether they find the commitments sufficient to address competition concerns. If found sufficient, a decision is made to make them legally binding.
Another way of proceeding is issuing a prohibition decision. This path requires an in-depth investigation which might result in an official finding of infringement. Under a prohibition decision, companies may also be fined for their practices.
One may also question the decision of the European Commission to introduce a commitment decision rather than a prohibition decision. Indeed, the latter presents several advantages and may appear to be better suited for the case under study.
Firstly, it has greater requirements in terms of the level of qualitative and quantitative evidence necessary to prove the infringement. This could hence help better understand the sources and origins of Gazprom’s alleged abuse of dominant position. More effective remedies could be then proposed to address the identified competition issues.
Secondly, it contributes to a better understanding of law. It could hence provide guidance on how similar cases could be assessed by the EC in the future. For this reason, prohibition decisions are considered to have a stronger deterrent effect.
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Policy and Regulation Radar This section summarizes the key changes respectively in the EU or in the country regulation that may significantly affect the power and utilities companies.
What is changing in the EU regulation?
“Europe on the Move”: New mobility package
Key features Insights
On 31st May, the European Commission ‘Europe on the Move’ is a wide-ranging set of initiatives that will make traffic safer; encourage (EC) presented a package of proposals fairer road charging; reduce CO2 emissions, air pollution and congestion; cut red-tape for designed to modernise European businesses; fight illicit employment and ensure proper conditions and rest times for workers. mobility and transport. The aim of the The key elements of the Commission´s proposal are as follows: package is to help the sector to remain • Socially fair and competitive mobility: Clearer and common rules, combined with better competitive in a socially fair transition enforcement and the elimination of unnecessary red-tape, will contribute to a level playing towards clean energy and digitalisation. field between road hauliers. The package called “Europe on the Move” • Clean and sustainable mobility: the EC proposes to make use of improved emission consists of: standards, smart road charging as well as scale up the use of low-emission alternative • A long-term plan to deliver clean, socially energy for transport, such as renewable electricity, advanced biofuels, or hydrogen. fair, competitive mobility to all Europeans - For heavy vehicles, the EC plans to modify existing rules on permitted designs to improve in 2025. aerodynamics. • A first set of8 legislative initiatives with - The EC will also promote the use of the most fuel efficient vehicles through a monitoring a special focus on road transport. and reporting of CO2 emissions and fuel consumption. This monitoring data will also be • A number of non-legislative of use to local authorities if they wish to design appropriate road user charging schemes accompanying documents, presenting to discourage the use of the dirtiest vehicles. a wide range of EU policy support - Concerning road charging the EC has proposed: (investment financing for measures • Provide for fairer pricing by phasing-out time-based systems. Charging based on infrastructure, research and innovation, distance as opposed to time, better reflects actual usage, emissions and pollution. collaborative platforms, etc.) • Reward environmentally-friendly vehicles. Member States should vary the level of A number of these proposals have direct the charge based on the CO2 performance of vehicles. or indirect implications for the energy • Contribute to sustainable infrastructure funding. sector. This package seeks to encourage These proposals are accompanied with provisions for electronic tolling allowing seamless cleaner transport, thereby contributing travel between Member States. to the EU’s efforts to meet itsParis Agreement commitments: • Connected mobility: Current EU tolling systems lack interoperability, which is a problem especially for cross-border traffic. Aninteroperable system would allow one toll tag and • There are incentives for cleaner fuels, one simple billing system. with further initiatives to follow relating to emissions standards for cars and vans, as well as for heavy goods vehicles. Next steps • Strong emphasis is put on e-mobility and the deployment of electric vehicles, This first batch of 8 proposals will be complemented over the next 12 months by other complementing the ‘Clean Energy for All proposals, including on post-2020 emissions standards for cars and vans as well as the Europeans’ package. first-everemission standards for heavy-duty vehicles. • It is also an input for completing the Energy Union, that identified the transition to an energy efficient, decarbonised transport sector as one of its key areas of action.
Link: Europe on the Move. Commission launches new mobility package
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European Energy Council
Key features Insights
The European Energy Council that took The main aspects commented about each legislative proposal are as follows: place on June 26th, was focused on the • Energy efficiency labelling: The main new elements are: European Commission’s ‘Clean Energy for - Rescaling: The regulation establishes deadlines to replace the current A+, A++, A+++ All Europeans’ package. classes with an A to G scale. The Council adopted, without debate, a • 6 years as general deadline, combined with 18 additional months aiming for the regulation on energy efficiency labelling. appearance of the label in shops; This will allow customers to be more • 15 months for the “white” products (dishwashers, fridges, washing machines), aware of the energy efficiency and energy combined with 12 additional months aiming for the appearance of the label in shops consumption of household appliances, and 9 years for heaters and boilers with a sunset clause of 13 years. thus helping them to reduce their energy - Product database: it will operate from January 2019. The database will enable market costs and contributing to the moderation surveillance authorities to enforce labelling requirements, and make sure that efficiency of energy demand. calculations behind the label correspond to those declared. In addition, the Council agreed its position on two proposals for revised directives on: • Energy efficiency: The Council agreed its position on a proposal for a revised directive on energy efficiency. The main elements are: • Energy efficiency: establishing a 30 % - Overall EU energy efficiency target of 30% for 2030. EU energy efficiency target and an energy - An energy saving obligation of 1.5%, decreasing to 1.0% for the period 2026-2030, savings obligation of 1.5 %, decreasing to unless the mid-term review in 2024 concludes that the EU is not on track to meet its 1.0% for the period 2026-2030. targets. • Energy performance of buildings: - Long term individual actions may count for energy savings obligation. aiming to promote energy efficiency in - Alternative measures are recognised as equivalent to energy efficiency obligation buildings and to support cost-effective schemes. building renovation with a view to the - Possibility of partially counting renewable energy generated on-site towards savings in the long term goal of decarbonising the highly 2020-2030 period. inefficient existing European building - Obligation to take into account energy poverty when designing new measures. stock. - Improved metering and billing provisions for the benefit of final users of heating and Also, the Council took note of a cooling. progress report on the legislative • Energy performance of buildings: The Council agreed its position on a proposal for a files under the Clean Energy package revised directive on the energy performance of buildings. The main elements are: regarding in particular the internal - The proposal requires member states to establish long-term renovation strategies, market for electricity, governance, addressing also energy poverty. It strengthens the links between energy efficiency policy energy from renewable sources and and financing. interconnections. - The revised directive promotes electro-mobility, by requiring at least one charging point Finally, the Council was informed by the per ten parking spaces for electric vehicles in non-residential buildings and pre-cabling Commission on recent developments in for every parking space in residential buildings. These requirements will apply to buildings the field ofexternal energy relations. It with more than ten parking spaces. was highlighted the recent request for a - The introduction of a smartness indicator for buildings is proposed and the inspection negotiating mandate on an agreement of heating and air conditioning systems is simplified. between the EU and the Russian - The proposal underlines the importance of aligning the Digital Single Market and the Federation on the Nord Stream 2 Energy Union agendas, as digitalisation of the energy system is quickly changing the pipeline. The aim of the agreement is to energy landscape, from the integration of renewables to smart grids and smart buildings. avoid legal uncertainty and ensure that the Next steps on-shore part of the pipeline complies with all the EU’s relevant legislation in this field. The agreements on revised directives will allow for the start of negotiations with the European Parliament.
Link: European Energy Council
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Key consultations from EU
What is discussed? Insights Link
“Consultation on the list of proposed EU seeks to collect views on the need for Link to the consultation projects of common interest for Cross- a Cross-Border Carbon Dioxide Transport Border Carbon Dioxide Transport” Infrastructure (on the third list of projects proposed for the PCI label in energy infrastructure) from an EU energy policy perspective bringing together security of supply, market integration, competition and sustainability. Closing date: August 15th.
“Evaluation of the TEN-E regulation” EU seeks to collect views on the Trans- Link to the consultation European Networks - Energy (TEN-E) Regulation as part of a wider evaluation to assess the impact of the TEN-E regulation on Europe’s energy networks and the progress of Projects of Common Interest (PCIs), including a consideration of how the regulation might evolve in the future. Closing date: September 4th.
“Consultation on the mid-term evaluation EU seeks to collect views on the Nuclear Link to the consultation of the Nuclear Decommissioning Assistance Decommissioning Assistance Programme Programme” by means of a questionnaire. This public consultation is designed to support the mid-term evaluation of the Nuclear Decommissioning Assistance Programme for the 2014-2020 programming period. Closing date: September 29th.
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Country reporting on changes in the Policy and Regulation framework United Kingdom Topic Key features Insights Next Steps
Embedded • Ofgem (the regulator) considers Transmission • The new regulation is likely to reduce the Final decision Generation: Network Utilisation Use of System (TNUoS) competitiveness of smaller distribution taken in June Modification demand residual payments to Embedded system connected generators. 2017. of TNUoS Generation to be a “major concern” and • In particular the reduction of embedded charging distortion in the capacity and wholesale benefits is likely to make small generators agreement market, driving up consumer costs (see last less competitive in the capacity market and Newsletter). lead to higher capacity market clearing • In this context, Ofgem has proposed to reduce the prices as embedded generators will not payment received by small electricity generators be able to bid as low as they have done at peak times. The current payment at £47/kW before. is expected to rise to £70/kW over the next four • Ofgem expects to reduce the cost to years. Ofgem has decided to introduce a phased consumers with the modification of the reduction of £3/kW to £7/kW over 2018 to 2021. current system.
Electricity • Ofgem is proposing a reduction in National • Reduced allowances are likely to feed A final decision Network Price Grid’s allowance as it has voluntarily decided to through into end user electricity prices on proposals is controls – defer £480 million of its allowed expenditure. of which network costs are a significant expected to be reductions National Grid was expected to use this allowance proportion. published at the in National to upgrade and maintain its high voltage • Whilst these represents potentially end of September Grid and transmission grid but lower than expected substantial revenue reductions for the in 2017. distribution demand meant that this expenditure was not electricity network companies this is part company necessary. of the general regulatory framework for allowances • Similarly lower than expected demand meant the sector and therefore these decisions that a number of Distribution Network Owners are unlikely to materially affect investor (DNOs) (Western Power Distribution, Scottish confidence. Power Distribution, UK Power Networks and Scottish and Southern Electricity) did not spend as much money as previously expected on network reinforcement. • Separately three distribution networks owned by Western Power Distribution and UK Power Networks canceled a number of major schemes and delivered others with lower expenditure. As a result Ofgem is proposing to reduce allowances by £132.2 million for these networks.
New • Ofgem has proposed that suppliers will not • The impact of this proposal should Initial comments protection for be able to back-bill customers for energy be marginal given that the industry on back-billing consumers consumed more than twelve months had already signed up to a voluntary were received from previously. agreement to achieve the same by 28 April back-billing • Some suppliers currently bill consumers on the outcome. 2017. Further basis of estimated consumption and record the • However, Ofgem is intervening because comments on meter reading later - if the actual consumption they did not believe that the voluntary Ofgem’s detailed is higher than that estimated, suppliers send agreement was beign followed by all so proposals are to consumers a catch-up bill to recover costs. In 2017 this regulation may now level the playing be heard in the energy suppliers signed a voluntary agreement field for suppliers by enforcing a common summer of 2017. to not back-bill consumers for energy used more standard. than twelve months previously and thereby • Ofgem expects the proposal to reduce recover all costs within a year. However, Ofgem uncertainty and cost to consumers. is concerned that suppliers are not keeping their commitment and has therefore proposed to enforce back-billing protections. • Additionally, Ofgem is considering whether different time-defined billing limits should apply to consumers based on the technology of meters they use. 22 20 Newsletter Power & Utilities Newsletter Power & Utilities
Country reporting on changes in the Policy and Regulation framework
United Kingdom Topic Key features Insights Next Steps
Extension to • The government has extended ECO and outlined • ECO can be a complex and A consultation on this the Energy key changes to the scheme. ECO is a government costly scheme to participate in is expected to begin in Company initiative aimed at targeting fuel poverty and as a supplier. Suppliers below the summer of 2017. Obligations lowering carbon emissions by increasing energy a certain size threshold are no The government has Scheme (ECO) efficiency. As a part of the scheme, large energy required to participate. made a commitment suppliers work with installers to provide energy to this scheme till • The ECO extension is expected efficient tools to consumers’ homes. The scheme 2022. to obligate three new suppliers ran from April 2015 to the end of March 2017. given their size. Particularly • The extended scheme began in April 2017 and key for these suppliers new to changes being proposed include: the scheme it is likely to be a substantial cost burden although - Focusing eligibility requirements wherein more their participation will have been support is to be directed to lower income groups; expected and they will have had - Granting local authorities the ability to determine time to prepare. households for ECO support which suppliers • Separately some of the reforms can use to identify up to 10% of their Affordable to the scheme are intended Warmth Obligation; to simplify the scheme to - Closure of the Carbon Savings Community make it simpler and cheaper to Obligation and maintaining a minimum level of participate in. solid wall insulation and delivery to rural areas; and • As the government’s main - Introduction of a system of ‘Deemed scores’ domestic energy efficiency using a simplified version of the current SAP scheme it was important that methodology. it was extended particularly given the perceived failure of an alternative programme for energy efficiency (the Green Deal) that sought to encourage home owners to invest in their own energy efficiency measures.
Closure of the • The Renewables Obligation (RO) scheme – one the • The closure of the RO in March Scheme closed. Renewables UK government’s main support mechanisms for 2017 was announced in 2011 and Obligation large-scale renewable electricity projects – has has long been expected. to new closed to new generating capacity. • There is currently uncertainty applications • Large-scale renewable electricity projects are over future budgets for now exclusively supported by the Contracts for renewables support through the Difference (CfD) policy. CfD mechanism particularly for onshore wind.
• The final closure of the RO may now limit the ability for new onshore wind development to be financially supported in the UK.
23 21 NewsletterNewsletter Power Power & & Utilities Utilities
Country reporting on changes in the Policy and Regulation framework France Topic Key features Insights Next Steps
Obligation • In 2009 the Parliament started • While it appears volunteer the Decree is highly The timely delivery to improve discussion about the improvement of flexible: of the audit energy building energy efficiency. Nine years - If works have been performed before 2006, the report presenting efficiency of later the Decree has been passed. target is compared before beginning of such measures to public service satisfy targets may • The Decree is set in accordance with works and tertiary be questionable the objective of the energy transition - If works are too expensive (€200/sq.m) or not purpose since it’s due on law to reduce the final energy profitable enough (breakeven on 5 for private buildings July 1st, 2017. consumption by 20% until 2030 and actors and 10 years for public actors) then they This short notice 50% until 2050. are not mandatory. is directly a • The Decree targets public service consequence of • Over the past years the best in class obtained and tertiary purpose buildings the 9 years delay a decrease in energy consumption comprised having a surface larger than 2,000 before coming to between 20% and 39%. In this respect sq.m (80% of total tertiary buildings) the Decree. obtaining in three years a 20% saving for all that represent about 15% of the final building looks critical. energy consumption in France and sets differenttargets in terms of energy saving: - 25% of savings by 2020, - 40% of savings by 2030, - 60% of savings by 2050. • To reach these targets the Decree asks different actions to buildings owners: - An energy efficiency audit report (to be presented in July 2017) presenting measures to satisfy the target for 2020 but also a scenario to reach 40% of saving by 2030. - Education of employees for a sustainable use of premises. - A monitoring by a public Agency.
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Newsletter Power & Utilities
Country reporting on changes in the Policy and Regulation framework
Spain Topic Key features Insights Next Steps
New Royal • Last May, a renewable facilities auction took • Each participant will offer a reduction The auction will be Decree for place in Spain. (See details and rules in Q4 2016 on the initial value of the investment held on July 2017. remuneration Newsletter). As a result of the auction, there according to their calculations of The projects of new were allocated 2.979 Mw to wind facilities, 1 efficiency and profitability that they should be finished renewable Mw to photovoltaic facilities and 20 Mw to expect of each project. before 31st facilities other technologies. • The rules for the new auction are December 2019. based on an • Although there were presented a lot of bids, it the same as those used on previous auction was established a maximum limit of 3,000 Mw auction. The differences are: and many bids were left out of the auction. For - Unlike previous auction in which this reason, the Spanish Government has called a all renewable technologies could new auction. participate, the new auction is only for • As in the previous auction, the concept wind and photovoltaic facilities. auctioned is a percentage of reduction on - The maximum limit values for the the initial value of the investment fixed percentage of reduction established by the Spanish government. This amount by the Spanish government have been will be included in the calculation of the incremented. remuneration. • As in the previous auction, these rules benefit to the wind facilities. In case of a tie, the technologies with more operating hours (wind facilities) will be allocated.
Renewal of • In June 2017, the Spanish government has • For example: The operating permit for The Spanish the operating passed the extension of the term to submit the “Almaraz” started on 8th June 2010 with Energy and permit for the request of renewal of the operating permit for a validity of 10 years (8th June 2020). Climate nuclear power the nuclear power plants. With the previous regulation the request Comprehensive plants of the renewal had to be submitted Plan is expected • According to the previous regulation, the on 8th June 2017. Now, the deadline for 2018. nuclear power plants had to submit the request has been extended. The request can 3 years before the expiration date of the be submitted 2 months later than the operating permit. Now, they have the possibility approval of the Spanish Energy and Climate to submit the request 2 months later than the Comprehensive Plan (expected for 2018) approval of the Spanish Energy and Climate or when they have to present the Periodic Comprehensive Plan (expected for 2018), or Safety Review (31st March 2019). when they have to present the Periodic Safety Review (31st March of the previous year to the • However, the term to present the expiration year) if the Plan has not yet been documentation associated has not been approved. extended. The documentation has to be presented 3 years before the expiration date of the operating permit. With this documentation the Nuclear Safety Council will evaluate the continuity of the activity if the request of renewal is submitted.
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Country reporting on changes in the Policy and Regulation framework
Germany Topic Key features Insights Next Steps
Regulation • The Regulation on public charging stations deals • The amendments safeguard that public The amended on public with the technical requirements to be fulfilled charging stations operators offerad hoc regulation is Charging by operators of public charging stations charging either by cash payment or effective since 14 Stations as regulated in the European Directive on direct payment methods, e.g. by credit June 2017. infrastructures for alternative fuels. card. This is for the benefit of the users, • The regulation was now amended with respect while it does not limit e-roaming use to: cases. It opens up all new infrastructure to any customer. - the requirements to offer ad hoc charging, - exemptions for low load charging, • The regulation also clarifies, who is considered to be - the definition of charging station operators. operator of the charging stations and thus bears the duties and profits from certain reliefs. This gives security to all operators, not only to those operating public stations.
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Snapshot on surveys and publications
Deloitte
The carbon-neutral utility: Building a low-carbon economy through cleaner power – June 2017 The push toward sustainable energy has gained substantial momentum in recent years. How can various technologies being used in sustainable energy generation help power utilities navigate the potentially difficult choices involved in “greening” their output? Link to the survey
Drivers of digital disruption - The utilities sector mega trends – June 2017 The Internet of Things is beginning to transform the Energy and Utilities sector, with customers, employees and assets all becoming increasingly connected. Link to the survey
Choose, aggregate, transact: Increasing options for electricity customers – May 2017 Renewable energy demand is driving utility business model change: Demand for renewable energy and increasing penetration of distributed energy resources is transforming the industry. Utility business models are changing in response to this new paradigm. Link to the survey
Role of Blockchain in the Energy and Resources Industry – April 2017 Blockchain revolution has gone beyond the financial services industry and is evolving as the next game changer for many businesses across many sectors. The documents brief on how Blockchain could impact the energy and resources industry. Link to the survey
Agencies or research institutes
International Energy Agency Tracking Clean Energy Progress 2017– June 2017 The report highlights the overall status and recent progress in developing and deploying key clean-energy technologies. It brings together broad IEA expertise, integrating several analysis. Link to the survey
Energy Technology Perspectives – 2017 This year’s edition of the International Energy Agency (IEA)’s comprehensive publication on energy technology focuses on the opportunities and challenges of scaling and accelerating the deployment of clean energy technologies. This includes looking at more ambitious scenarios than the IEA has produced before. Link to the survey
Status of Power System Transformation – 2017 This report informs stakeholders of the dynamic changes that are occurring in power systems around the world and provide insight into measures that can help to overcome new challenges. Link to the survey
European Commission Sustainable and optimal use of biomass for energy in the EU beyond 2020 – June 2017 This study provides an analysis of biomass supply potentials for energy use in the EU, projections of EU bioenergy demand post-2020, and an impact assessment of possible EU policy options for bioenergy sustainability post-2020, with a focus on biomass for heat and power. Link to the survey
Report on the first results of H2020 projects on energy efficiency and system integration – May 2017 The study analyses the initial results from Horizon 2020 projects in four areas: Energy Efficiency, Low Carbon Energy (grids and storage), Low Carbon Energy Renewable Energy System Market Uptake and Smart Cities and Communities. It comes in support to the Interim Evaluation of H2020 and the midterm review of the Multiannual Financial Framework. Link to the survey
25 27 NewsletterNewsletter Power Power & & Utilities Utilities
Mapping of the current EU clean energy finance landscape – April 2017 The main goal of this report is to map and explain the sources of finance and corresponding clean energy investment opportunities that are interacting in the EU’s clean energy finance landscape. Suggestions on how to usefully incorporate such findings in existing macro- economic models are then provided. Link to the survey
Case study – Energy Resilience and Vulnerability in the EU and Other Global Regions – April 2017 This case study examines the resilience of the EU economy to energy supply shocks and provides comparisons with six other global regions. Trends in the EU and other global regions are reviewed for key indicators that measure aspects of resilience to energy supply shocks. The case study then proceeds to present the results of new econometric analysis of the degree of substitutability between energy and other production factors across EU sectors. Link to the survey
Eurelectric Eurelectric position paper on Energy Poverty – May 2017 A number of experts report that “energy poverty is an extensive and increasing problem”. They generally refer to people having difficulty paying their energy bills and/or adequately heating/cooling their homes. Quantifying “energy poverty” at EU level is however very complex as it is a multifaceted issue and data are not comparable from a country to another. Link to the survey
Electrification report : a bright future for Europe – the value of Electricity in Decarbonising the European Union – April 2017 This report makes it clear that electricity from carbon-neutral generation is the cleanest energy carrier, making electricity the main vector for a decarbonized energy future in Europe. The value proposition of electricity in European societies today is magnified by the fact that this sectors can benefit from the electricity sectors clear commitment and trajectory towards carbon neutrality. Link to the survey
European Commission’s proposal for a regulation on the internal market for electricity – April 2017 In this report, Eurelectric supports the overarching legal coverage provided by the electricity regulation to further integrate wholesale market. Liquid and well-functioning wholesale markets where prices reflect the actual system situation will sustain RES integration, decentralized generation and empower consumers. Link to the survey
Oxford institute for Energy The Decarbonised Electricity System of the Future : the “Two Market” Approach – June 2017 This paper suggests to create separate markets for different sorts of power at both producer and consumer ends: “on demand” or “as available” power. Consumers would be able to select the type of power, for a better optimization of resources. Link to the survey
Future European Gas Transmission Bottlenecks in Differing Supply and Demand scenarios – June 2017 Projecting forward to 2030 this paper, using the EWI TIGER model, looks at how bottlenecks may change under two scenarios based on high and low cases for LNG and Russian pipeline gas imports respectively, in the context of modest European gas demand growth. Bottlenecks are examined both in terms of LNG and pipeline import capacity at the European border and at critical interconnector points within Europe. Link to the survey
Global Trends in Oil and Energy: Implications for the GCC and Foreign Policy Responses– June 2017 This paper examines how global energy markets are evolving, what this could mean for Gulf oil exporters, and how these countries could respond. It identified ten structural trends that are expected to be largely responsible for shaping global energy markets over the next two decades and analysing their implication on Gulf exporters. Link to the survey
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European traded gas hubs: an updated analysis on liquidity, maturity and barriers to market integration – May 2017 This Energy Insight provides an analysis on the maturity and development of European traded gas hubs, including both longer-term established hubs and recently emerging ones, both from a liquidity and price perspective, in order to come to an overall assessment of the policy goal of achieving a Single Energy Market for natural gas in Europe. This Insight offers an update on both hub liquidity development and hub price metrics to the end of 2016. Link to the survey
Natural gas demand in Europe in the next 5-10 years – May 2017 In this presentation, the author argues that even if gas demand growth in 2015 and 2016 may not necessarily be signs of recovery, the next 5-10 years will/could be different from the longer term ‘future of gas’ debate in Europe. The presentation concludes that now is the time to make the arguments of the immediate benefits of natural gas, but at the same time, there will not be ‘one scenario fits all’ and specific factors need to be considered for each country. Link to the survey
European Gas Pricing Dynamics – May 2017 This paper argues that the Dutch TTF is now the most liquid hub in Europe (in front of the UK NBP). He also analyses the dynamics of the new Groningen cap, US LNG and record Russian flows. The presentation concludes with a focus on the potential impacts of Brexit on policy and infrastructure. Link to the survey
Does the Portfolio Business Model Spell the End of Long-Term Oil-Indexed LNG Contracts? – April 2017 The paper argues that, despite the challenging period to 2021 with a soft market or ‘glut’ of LNG, the majors amongst the portfolio players are well placed for the next wave of new supply projects in the mid 2020s, due to the synergies from existing positions, advantaged cost of debt and more flexible contracting/sales and pricing strategies. Link to the survey
Managing Electricity Decarbonisation: learning from experience – the cases of the UK and Spain– April 2017 The background of the article is that the EU is aiming for an Energy Union; member states have common targets. So it might be expected that member states would all have very similar measures in place. In fact, there are huge differences between countries. This study compares the approaches in Spain and the UK in order to understand what works best and what lessons can be learned from their experience. Link to the survey
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